Correlation Between FocalTech Systems and Castles Technology

Can any of the company-specific risk be diversified away by investing in both FocalTech Systems and Castles Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FocalTech Systems and Castles Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FocalTech Systems Co and Castles Technology Co, you can compare the effects of market volatilities on FocalTech Systems and Castles Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FocalTech Systems with a short position of Castles Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of FocalTech Systems and Castles Technology.

Diversification Opportunities for FocalTech Systems and Castles Technology

-0.59

Correlation Coefficient

FocalTech Systems  Castles Technology

Excellent diversification

The 3 months correlation between FocalTech and Castles is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding FocalTech Systems Co and Castles Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castles Technology and FocalTech Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FocalTech Systems Co are associated (or correlated) with Castles Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castles Technology has no effect on the direction of FocalTech Systems i.e., FocalTech Systems and Castles Technology go up and down completely randomly.

Pair Corralation between FocalTech Systems and Castles Technology

Assuming the 90 days trading horizon FocalTech Systems Co is expected to generate 0.86 times more return on investment than Castles Technology. However, FocalTech Systems Co is 1.16 times less risky than Castles Technology. It trades about 0.02 of its potential returns per unit of risk. Castles Technology Co is currently generating about -0.1 per unit of risk. If you would invest  8,620  in FocalTech Systems Co on September 26, 2024 and sell it today you would earn a total of  270.00  from holding FocalTech Systems Co or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FocalTech Systems Co  vs.  Castles Technology Co

FocalTech Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FocalTech Systems Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FocalTech Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Castles Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castles Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with FocalTech Systems and Castles Technology

The main advantage of trading using opposite FocalTech Systems and Castles Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FocalTech Systems position performs unexpectedly, Castles Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Castles Technology will offset losses from the drop in Castles Technology's long position.

The idea behind FocalTech Systems Co and Castles Technology Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.